The average UK house price fell for the first time since March last month, as the stamp duty holiday ended, and the tax began to be gradually reintroduced, according to Nationwide. The lender said it was inevitable that prices would fall with the return of the stamp duty, but there are still several factors supporting market activity.
BBC News reports that the building society recorded a decline of 0.5 per cent in July, which wiped out much of the gains seen in June as buyers rushed to beat the stamp duty deadline, but said that the rate of annual house growth stood at 10.5 per cent this month.
From 30 June, the stamp duty threshold was reduced from £500,000 to £250,000 and will return to the pre-pandemic level of £125,000 on 30 September.
The tax holiday was introduced by the chancellor and matched with similar schemes in Wales and Scotland and had been credited with helping the market to recover from the lockdowns, building on pent-up demand and massive interest in larger properties.
However, critics have said that it helped drive prices even higher and left many properties out of reach for many first time buyers despite assistance being made available from the government.
The rate of growth stood as 13.4 per cent in June when transactions reached an all-time high of nearly 200,000, double the number expected during normal times, and the average house price stood at £244,229.
Nationwide’s chief economist, Robert Gardner, said: “The modest fall-back in July was unsurprising given the significant gains recorded in recent months.
“Indeed, house prices increased by an average of 1.6% a month over the April to June period – more than six times the average monthly gain recorded in the five years before the pandemic. The tapering of stamp duty relief in England is also likely to have taken some of the heat out of the market.”
He explained that for anyone buying a property now above £250,000, the maximum stamp duty saving had been reduced from £15,000 to £2,500 from the end of June.
But Nationwide added that the market UK-wide generally remained ‘solid’ thanks to record low-interest rates on mortgages and weak supply of new homes.
The lender said that demand for houses was still outstripping supply and enquiries for flats as people continue to work from home.
However, some other property insiders urged a more cautious outlook, including Guy Harrington, the chief executive of residential lender Glanhawk, who noted that it was ‘astonishing’ how removed from reality the last 12 months had been.
“Pent up demand outstripping supply, coupled with government support schemes, has overheated the market to the point where far too many have been priced out,” he said.
“We can’t forget that household income is likely to fall by the end of the year and availability of credit could also dry up. Alongside a mass return to the office underpinning a reversal of the so-called ‘race for space’ phenomenon, it wouldn’t be surprising if a pricing shock was just around the corner.”
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